Mediclaim Vs Health Insurance – What is the difference?

With the rising uncertainties of life and increasing medical expenses, everybody prefers mediclaim or health insurance policy to safeguard them against the medical contingencies. Many of us use the words Mediclaim policy and Health insurance policy interchangeably. But few people know that these are two different terms with a difference in their nature and benefits. This article would provide details about Mediclaim and Health Insurance Plans and differences between these two.

Mediclaim provide financial cover to individuals for treatment of medical conditions, diseases, and accidents. The insurer provides a cashless medical facility if the treatment is taken from the insurance company’s network or the insured has to bear the bill himself and then claim the money back as reimbursement from insurance companies.

There are two main categories of mediclaim:

Individual mediclaim policy – Under this, the policy is issued to individuals. If there are two family members, one can take two individual mediclaim policies.

Family Floater mediclaim policy – There is a floating sum assured for each member with a cap for the family as a whole. For example- a family floater of Rs. 4 lakh allows any family member to claim benefit of overall Rs. 4 lakh. This would also depend on the policy terms, hence one should read the family floater details before opting for such policy

What is a Health Insurance Plan?

A health insurance plan is a contract between the insured and the insurance company under which the insurer agrees to cover an individual’s medical and surgical expenses for an annual premium.

A health insurance policy comes with the following features-

Cashless treatment – Health insurance companies have tie-ups with many hospitals all around the country. You can avail the facility of cashless treatment if admitted to any of those hospitals. You just need to tell your policy number and the rest of the things will be managed by the hospital and the insurer.

Pre and post-hospitalization – Depending upon the plan chosen, the policy covers both pre and post-hospitalization charges for a period of 30 to 60 days.

No claim bonus – For every claim-less year, you get either a discount in the premium or an increase in the sum assured.

Co-payment – The premium can be lowered by opting for a co-payment option in which a pre-defined amount of unpaid deductibles has to be paid by the policyholder.

Ambulance charges – You can avail the additional feature of ambulance charges.

Treatment through other means – few policies even allow the insurer to take the alternative treatment, Ayurvedic, Homeopathy, Ayush, Unani, etc.

Tax benefits – The premium paid under a health insurance plan is eligible for deduction u/s 80D of the Income Tax Act, 1961. A taxpayer (less than 60 years of age) can avail a tax deduction up to Rs. 75,000 for the premium paid for a policy for himself, spouse, children or parents.

Mediclaim policies are limited to hospitalization expenses, whereas health insurance has a broader scope which includes many other benefits like lump sum payment on detection or treatment of critical illnesses or specific diseases along with hospitalization expenses. It also includes compensation for loss of income, ambulance charges or cost of preventive health checkups, etc.

2) Is Hospitalization mandatory?

Hospitalization expenses are the expenses incurred during the hospitalization of the insured. It is mandatory to get hospitalized to get the benefit of mediclaim policy, whereas in health insurance it is not mandatory.

3) What are the terms of payment during a claim?

In mediclaim policy, you can have multiple claims till the sum assured gets exhausted but in the health insurance policy; usually, you are allowed to have only a single claim. By taking up a Mediclaim plan, only actual expenses incurred due to hospitalization from specific diseases are taken care of whereas, in a health insurance policy, you are eligible to receive a lump sum amount from the insurance company for treatment like critical illness policy, cancer illness policy or policy covering specific diseases or surgery.

4) What about Critical illness?

Health insurance plans help you to cover 30+ critical illnesses, including diseases like cancer, stroke etc. on taking up the Critical Illness Rider, however depending on the insurance company based on the policy. This additional feature is not available in the Mediclaim policy.

5) What are the Income Tax Exemptions?

The amount paid towards the mediclaim / Health insurance premium for self, spouse, or children qualify for the deduction of maximum Rs. 25,000 u/s 80D of the IT Act, 1961. There is an additional benefit of Rs. 50,000 on the mediclaim premium for parents and total tax benefits that can be availed is upto Rs 75,000.

6) Any additional benefit in a health insurance plan or mediclaim plan?

A health insurance plan may cover all the additional expenses like maternity, newborn expenses, emergency evacuation, daycare procedures if opted in the plan whereas mediclaim policies do not offer to cover such expenses.

Conclusion: Mediclaim and health insurance – both are different ways to meet the expenses of emergency medical situations and both providing different benefits to the insured. Health insurance plans are wider in scope, covering more aspects and providing more benefits and options to the insured. One must be very meticulous while choosing their health plan, keeping in mind the benefits required by them.

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I have done my Post Graduation in Finance. I have over 20 years of experience in analyzing various investment options and money saving ideas. I love doing financial planning, Mutual Fund Analysis, Searching long term Stocks for wealth creation, IPO Reviews, Analyzing Life Insurance and Health insurance Plans etc.